Personal Profit/Advantage exclusion

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The United States District Court for the District of New Jersey, applying Delaware law, has held that an exclusion precluding coverage for misappropriation of trade secrets in a directors and officers liability policy barred coverage for a claim brought against the insured by a competitor alleging the negligent failure to supervise an employee.  Sprout Health, LLC v. RSUI Indem. Co., 2020 WL 2507776 (D.N.J. May 15, 2020).  The court determined that the negligence count was “directly contingent” on a showing that the insured’s employee misappropriated the competitor’s trade secrets.
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Continue Reading Negligent Failure to Supervise Claim Barred by Misappropriation of Trade Secrets Exclusion

Applying New York law, a federal district court has held that an insurer has a duty to defend and provide independent counsel to an insured realtor for claims involving intentional acts and repayment of commissions. Great Am. Ins. Co. v. Houlihan Lawrence, Inc., 2020 WL 1487294 (S.D.N.Y. Mar. 7, 2020).  The court also held that, because the underlying case was still pending, the question of whether the insurer had a duty to indemnify was premature.
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Continue Reading Insurer Required to Defend and Provide Independent Counsel for Potentially Covered Claims

The U.S. Court of Appeals for the Eighth Circuit, applying Kansas law, has held that a contract exclusion bars coverage for a lawsuit asserting claims for conversion and breach of fiduciary duty for failure to purchase a deceased owner’s stock under a stock repurchase agreement.  Russell v. Liberty Ins. Underwriters, Inc., 2020 WL 812910 (8th Cir. Feb. 19, 2020).  The court also held that the agreement was not an employee benefit plan that would implicate fiduciary liability coverage.
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Continue Reading Contract Exclusion Bars Coverage for Lawsuit Over Stock Repurchase Agreement

The U.S. District Court for the Middle District of Florida, applying Florida law, held that a directors and officers liability insurance policy did not provide coverage for a claim asserted by a receiver seeking the return of bonus and other compensation amounts paid to a former director and officer of the company because (1) the policy’s profit exclusion applied; and (2) the claw back claim did not arise out of a “Wrongful Act.”  Desai v. Navigators Ins. Co., 2019 WL 3068398 (M.D. Fla. July 12, 2019).
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Continue Reading No Coverage for Receiver’s Claw Back Claim Against D&O Because Profit Exclusion Applied and Claim Did Not Arise Out of a “Wrongful Act”

The United States Court of Appeals for the First Circuit, applying Massachusetts law, has affirmed the district court’s holding that a professional services exclusion in a real estate advisory fund’s D&O policy did not excuse the duty to defend a lawsuit brought by an investor in the fund because the allegations at issue were ambiguous as to the insured’s alleged misconduct aside from investing in the properties at issue.  Scottsdale Ins. Co. v. Byrne, No. 18-1526, 2019 WL 211420 (1st Cir. Jan. 16, 2019).  The court likewise concluded that an ERISA exclusion did not apply because the complaint contained a count for negligence that did not reference ERISA-like fiduciary duties.  Finally, the court concluded that a conduct exclusion did not limit the insurer’s indemnity obligations because the default judgment against the insured encompassed both improper gains and losses resulting from negligence.
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Continue Reading Professional Services and ERISA Exclusions Do Not Bar Coverage for Mismanagement Lawsuit Brought by Pension Fund Against Real Estate Advisory Fund

Applying Connecticut law, a Connecticut state trial court has held that no coverage exists under a real estate errors and omissions policy for a lawsuit brought by property investors against two real estate professionals arising from the purported mismanagement of property investment companies.  Sarfaty v. United States Liab. Ins. Co., 2018 WL 3060110 (Conn. Super. Ct. May 25, 2018).
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Continue Reading Property Management and Financial Interest Exclusions Bar Coverage for Real Estate Professionals

The United States District Court for the Southern District of Florida has denied an insured’s request for indemnity from its insurer for the amount owed under a settlement agreement with the state of Florida over grand theft charges against the insured.  The court held that, under Florida law, the settlement does not constitute covered “Loss” because the payments were restitutionary in nature, regardless whether there was an admission of guilt or final adjudication.  Philadelphia Indem. Ins. Co., v. Sabal Ins. Group, Inc., 2017 WL 4310700 (S.D. Fla. Sept. 28, 2017).
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Continue Reading No Indemnification for Insured’s “Restitutionary In Nature” Settlement Payments, Even Without Admission of Guilt or a Final Adjudication

A New York state trial court, applying New York law, has held that a fee arrangement exclusion contained in a professional liability insurance policy precludes coverage for claims arising from an insured’s force-placed insurance business.  QBE Americas, Inc. v. Ace Am. Ins. Co., 2017 WL 4122651 (Sup. Ct., N.Y. County Sept. 18, 2017).  The court also held that the policy does not cover costs incurred responding to third-party subpoenas.
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Continue Reading Fee Arrangement Exclusion Bars Coverage for Claims Arising from Alleged Force-Placed Insurance Scheme

The United States Court of Appeals for the Ninth Circuit, applying Idaho law, has affirmed a lower court’s decision that a judgment against an insured for a violation of the Clayton Act did not preclude coverage under a liability insurance policy’s “financial gain” exclusion.  St. Luke’s Health Sys., Ltd. v. Allied World Nat’l Assurance Co., 2017 WL 3727010 (9th Cir. Aug. 28, 2017).
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Continue Reading Profit Exclusion Does Not Apply to Judgment Against Insured for Anti-Trust Violation

Applying Colorado law, the United States District Court for the District of Colorado has held that allegations of collusion to fix wages in violation of the Sherman Antitrust Act do not fall within the scope of professional liability coverage for “counseling” services because “counseling” does not include an alleged agreement to fix wages.  Colony Ins. Co. v. Expert Group Int’l Inc., 2017 WL 2131368 (D. Colo. May 17, 2017).
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Continue Reading Allegations Concerning Wage Fixing in Violation of the Sherman Act Do Not Fall Within Professional Liability Coverage for “Counseling” Services